Labour lunacy

[Sue U]

So I work my butt off and I can't leave what I have not spent to my kids? Why should the government take my house and property and money? They did nothing to earn that. At least I like my kids which is more than I can say about my government.
I earned it, I should be able to do with it what I please.

The fact is, dead people don't own property, and once you're dead you won't care or have any say over what happens to it. If you want to give away your fortune during your lifetime (subject to applicable gift tax), I have not so much of a problem with that. I'm even open to a $1 million exemption on the estate side (but not $5.3 million -- that's ridiculose). As to the government's entitlement, who provided you with the physical infrastructure, economic system, legal system, security etc. that enabled you to earn that money in the first place?

Oh, she just threw her firecracker into the room and walked away.

Hey, I've been working over here! I don't always have time to come and play with youse guys.

But while it of course an absurd idea on so many levels from both a moral and economics point of view, (not to mention completely unworkable from a practical stand point)

Fortunately, the world doesn't depend on your ipse dixit assertions to determine what is and is not absurd or unworkable. If you can provide some substantive reasoning to support your opinion, have at it.

[rubato]

This has been gone over before. Several times. But the largest portion in most estates has never been taxed. All of the increased value of real estate has not been taxed. If someone bought a house for $50,000 and it is now worth $500,000 $450,000 of that value is untaxed. The same is true of the increased value of stocks, bonds, art, collectables &c.

yrs,
rubato

[rubato]

And I would like to see one politician have the balls to suggest an enormous but finite hard-dollar (pound/Euro/Drachma) ceiling on income; once you've been paid this much, you've been paid enough (and the rest is taxed at 100%).

That would be nice, but I'd settle for a 100% estate tax instead.

That would be a much more 'fair' system even allowing the fact that people would use annual transfers just below the gift tax limit to get around it. More 'fair' in the sense that people would be starting out at a much more equal point in material wealth.

yrs,
rubato

[oldr_n_wsr]

As to the government's entitlement, who provided you with the physical infrastructure, economic system, legal system, security etc. that enabled you to earn that money in the first place?

I do believe I paid a whole bunch of money in taxes along with road tolls and bridge tolls and a whole slew of "fees" (aka other taxes) to fund such things during my lifetime. Any inheritance I have is money I saved, money I invested, money I spent to buy a house with.

people would use annual transfers just below the gift tax limit to get around it

As far as I know the annual gift tax limit is $10,000. Take many many years to give away when one is limited to 10K per family member.

More 'fair' in the sense that people would be starting out at a much more equal point in material wealth.

A race to the bottom sponsored (and controlled) by your government.

sorry, we will have to agree to disagree. Any time a gov takes away any extra of a persons lifes work, it is wrong IMHO.

[rubato]

As to the government's entitlement, who provided you with the physical infrastructure, economic system, legal system, security etc. that enabled you to earn that money in the first place?

I do believe I paid a whole bunch of money in taxes along with road tolls and bridge tolls and a whole slew of "fees" (aka other taxes) to fund such things during my lifetime. Any inheritance I have is money I saved, money I invested, money I spent to buy a house with.

The amount you saved, you invested, and which you used to buy a house is much less than the appreciation, which has never been taxed.

We have gone over this point a lot of times.


yrs,
rubato

[rubato]

people would use annual transfers just below the gift tax limit to get around it

As far as I know the annual gift tax limit is $10,000. Take many many years to give away when one is limited to 10K per family member.

.

You and your wife can each give $10,000 per year to an individual. If your children marry then you can give a total of $40,000 per year to a married couple and $20,000 per year to each of their children, an amount which adds up quickly.* And that was exactly my point, that even with this mechanism the amount transferred would be less. You often misunderstand in this way, why is that?


yrs,
rubato

* Over 3 three years gifts to a married child and spouse with two children would be $240,000.

[oldr_n_wsr]

If your children marry

Neither of my children are married nor do they have kids.
And many peole cannot give away their money in a timely manner as they may need it later in life. If one knew when he was going to pass away, sure they could plan, but none of us really ever know when our time is up.
And if there are all these ways to avoid an inheritance tax, why have one to begin with?
You seem to be in favor of a stifling inheritance tax, but in the same breath you are promoting ways around it.

You often misunderstand in this way, why is that?

Nope, not going there........

[Sue U]

I do believe I paid a whole bunch of money in taxes along with road tolls and bridge tolls and a whole slew of "fees" (aka other taxes) to fund such things during my lifetime.

Contrary to your (and popular) belief, the amount you actually pay in federal taxes is very small, and far too little to support even your share of the facilities and services the government provides for your benefit -- much less to pay for all those additional items you might or might not ever need. For example, only three cents of every federal tax dollar goes to transportation infrastructure, two cents to education and two cents to scientific and medical research. More than 45 cents goes to Social Security and Medicare/Medicaid/other health programs, and another 19 cents goes to national defense. Even if you paid $30,000 a year in federal taxes (which I highly doubt you do), only $900 ($2.46 a day) goes to providing you with interstate highways, airports, rail and shipping facilities, etc. At $30,000 in federal taxes, you'd be paying $5,700 ($15.61 a day) to be protected by the most powerful military in the world and to fund all the things they do. Do you really think you actually pay anywhere even near full freight for the value of things you get from the federal government?

[Sue U]

If your children marry

Neither of my children are married nor do they have kids.
And many peole cannot give away their money in a timely manner as they may need it later in life. If one knew when he was going to pass away, sure they could plan, but none of us really ever know when our time is up.
And if there are all these ways to avoid an inheritance tax, why have one to begin with?
You seem to be in favor of a stifling inheritance tax, but in the same breath you are promoting ways around it.

As a practical matter, you and your family and the overwhelming majority of families in the U.S. would not be affected at all by an estate tax -- even at 100% -- particularly if the gift tax exemption is adjusted or even if there is a $1 million exemption on the estate side. The point is to prevent accumulation of dynastic wealth -- transfers of hundreds of millions of dollars -- not a few hundred thousand.

[rubato]

If your children marry

Neither of my children are married nor do they have kids.
And many peole cannot give away their money in a timely manner as they may need it later in life. If one knew when he was going to pass away, sure they could plan, but none of us really ever know when our time is up.
And if there are all these ways to avoid an inheritance tax, why have one to begin with?
You seem to be in favor of a stifling inheritance tax, but in the same breath you are promoting ways around it.

If you have an estate which is taxable (> 5 Mil) you can afford to give it away. If you don't have kids then leaving an estate for them is moot so the transfer is moot. I am pointing out that even WITH this mechanism a 100% inheritance tax would still be more 'fair' (people start life closer to equal).

You often misunderstand in this way, why is that?

Nope, not going there........[/quote]

You really should. You routinely misunderstand things in a bizarre and mentally disorganized way.


yrs,
rubato

[MajGenl.Meade]

rubato - please stop it. You make a good argument and then spoil it by ad hominems.

[Joe Guy]

Do you really think you actually pay anywhere even near full freight for the value of things you get from the federal government?

Why should anyone need to pay full freight? That's why everyone who earns above a certain amount is required to pay taxes. We get the group rate. There would be no point in paying taxes if we had to pay full price for everything the government provided.

....I am pointing out that even WITH this mechanism a 100% inheritance tax would still be more 'fair' (people start life closer to equal).

How do people start life closer to equal when most people inherit their parents' estate when they are over the age of 50? If my parents died with a bank account valued at $10,000.00 it should go to the government instead of me so all people can start life equal?

[Sue U]

There would be no point in paying taxes if we had to pay full price for everything the government provided.

But that's exactly the point -- you couldn't afford any of those benefits without "the government" there to spread the cost over millions of people and generations of time, and but for "the government" there couldn't be any "group discount" at all, let alone the loss-leader rates we are actually paying. That's what justifies the government's collection of all taxes -- including an estate tax. What part of this is confusing you?

[Joe Guy]

What part of this is confusing you?

What is the benefit of a 100% estate tax?

[Sue U]

What part of this is confusing you?

What is the benefit of a 100% estate tax?

As I said before, the point is to prevent accumulation of dynastic wealth. It also promotes the circulation of money through the economy rather than its stockpiling by the plutocracy.

[Sue U]

From those commies at the Pink Paper:

January 7, 2014 7:16 pm
Inheritance should not be an alternative to hard work
By Robin Harding

In a world with more inherited riches, it makes no sense to cut estate taxes, says Robin Harding

The aspiring young law student Rastignac has his choice set out for him with brutal simplicity in Balzac’s 1835 novel Father Goriot. He can work: “There’s a nice prospect for you! Ten years of drudgery straight away.” Or he can do otherwise: “There is but one way, marry a woman who has money.”

Choosing between hard work or an heiress may seem archaic but according to Capital in the Twenty-First Century , an eagerly awaited book by the French economist Thomas Piketty, Rastignac’s dilemma is coming back. (The book is not out in English until March but its argument is already scattered around the internet along with Prof Piketty’s academic work.)

The choice has returned because of the rising importance of inherited wealth – on a scale that, for some, will make it a viable alternative to work. It poses a profound economic and social challenge to rich countries that believe they offer equality of opportunity. The UK is already getting a taste: high house prices in London, in particular, mean that, for many, inheritance is the only way to buy one.

The return of inheritance is not due to greater inequality or plutocrats in the top 1 per cent. Rather, it is a result of slower economic growth in rich countries. The lower the rate of growth, the smaller the percentage of society’s total wealth created by those who are alive today, and thus, by definition, the larger the percentage that is passed on from previous generations.

The first countries affected, therefore, are not the most unequal but those with the slowest growth. In France, Prof Piketty charts how the annual flow of inheritances was between 20 per cent and 25 per cent of national disposable income in the 19th century. It fell to about 5 per cent in the middle of the 20th century after two world wars destroyed most of the inheritable capital stock, followed by rapid growth, high taxes on capital, inflation that eroded existing financial wealth and labour-friendly laws.

But the flow of inheritances in the country is now back to 19th-century levels; it is heading that way in the US and UK too. It may be that we had a meritocratic moment in the last century but mistakenly decided that state of affairs was permanent.

Such mountains of inherited wealth dwarf the nest-eggs that people can accumulate by saving. In France, for example, the savings rate is more than 10 per cent of disposable income. The biggest savers, however, are those who enjoyed an inheritance – it is a lot easier to put money aside if you inherited a house and do not have to rent one. Consequently, such a flow of inheritances means they can account for more than 80 per cent of total wealth.

Greater inequality may not be the main cause of higher inheritances but higher inheritances certainly exacerbate inequality. If wealth is not evenly spread across society then inheritance repeats the pattern.

If, as Prof Piketty argues, the after-tax return on capital is higher than the rate of growth in the economy, then all heirs and heiresses need do is save enough of the income from their inheritance. So long as they do that, their share of society’s wealth will rise, or at least stay the same.

What to do about a rising share of wealth from inheritance is an age-old problem: it depends on how much society values equality of opportunity and outcome versus its distaste for redistributive taxes. The conclusion to Prof Piketty’s much broader book about capital – and his clear preference for redistribution – is a call for wealth taxes on a global scale.

That is a utopian prescription. But it is also possible to draw more immediate policy conclusions. The simplest answer is to increase the rate of economic growth, so that more wealth is created in our lifetimes. This is a powerful argument for more immigration into rich countries – and, therefore, for the passage of the US immigration reform now stalled in the House of Representatives. It also argues for all the usual supply-side reforms to bolster growth.

In any society that is willing to tolerate redistribution via estate duties and inheritance taxes, falling growth is a reason to increase them. In a recent paper with co-author Emmanuel Saez, Prof Piketty argues that the ideal rate of inheritance tax for the US and France is about 50-60 per cent. The optimal rate increases as growth falls relative to the return on capital.

At the least, in a world where more wealth is being inherited, it makes no sense to cut existing taxes on estates.

In the UK, the coalition government wisely decided against a cut to inheritance tax promised in the 2010 election campaign. In the US, the “fiscal cliff” in 2013 put the estate tax back to 40 per cent, but created a large exemption for estates of less than $5m.

As the baby-boom generation begins to confront its own mortality, political pressure to cut inheritance taxes will rise. That is a natural consequence of the desire that many people have to pass on wealth to their children.

Yet resisting such pressure should be a crucial goal in the coming decades. Particularly in the US, where policies, once established, are difficult to change, it is important to keep the estate tax in play now.

In the Balzac novel, the villainous Vautrin exhorts Rastignac to take the easy path: “You are at the crossway of the roads of life, my boy; choose your way.” Developed societies now face a similar choice. They should opt for the free-flowing meritocracy of the last century, not a return to the dynastic wealth of the one that preceded it.

[oldr_n_wsr]

only three cents of every federal tax dollar goes to transportation infrastructure,

And the road tax I pay on every gallon of gasoline goes where?

two cents to education

Along with $4000+ of my property tax bill.

Do you really think you actually pay anywhere even near full freight for the value of things you get from the federal government?

I'm sure there are other ways the gov collecgts from people aside from just income taxes to pay for it all. And sooner or later that probably trickles down and adds to the price of goods that I buy.
License fees, car regis, interstate truck licenses are passed on to the consumer.

Last time I checked, NY sends more tax money to DC than we get back (Sandy aid not included).

As a practical matter, you and your family and the overwhelming majority of families in the U.S. would not be affected at all by an estate tax -- even at 100% -- particularly if the gift tax exemption is adjusted or even if there is a $1 million exemption on the estate side. The point is to prevent accumulation of dynastic wealth -- transfers of hundreds of millions of dollars -- not a few hundred thousand.

I realize that.
Maybe I think this way because pretty much anything I have or will have I earned myself (either through direct labor or investments). If I want to give it all to my kids why should it matter if I earned/saved $1000 to give them or $100million? Why is it right for the gov to just take money I earned and presumably already paid taxes on. Want to tax investments as capital gains (short or long term) fine. As far as I have been subject to, I have never earned money (via labor, investment, winnings, etc) that has not had a chunk taken out by the government. Taxes were paid and whatever is left over after those taxes are paid, they are going to take because I died?
How is that right or just?

And what about those that are asset rich like farmers on LI? Their land was once worth next to nothing , now its worth perhpas hundreds of millions. When they die their heirs have to sell off just for the inheritance taxes. Wasn't the farmers fault that the land of yuppy-dom and hollywood east hamptons cuased thier land value to explode. All they and their families want to do is farm.

If you have an estate which is taxable (> 5 Mil) you can afford to give it away. If you don't have kids then leaving an estate for them is moot so the transfer is moot. I am pointing out that even WITH this mechanism a 100% inheritance tax would still be more 'fair' (people start life closer to equal).

For the recorrd, I do not have an estate near $5mill and doubt I ever will. I do have kids that I will leave whatever I have left when I die and they will probably not have to pay inheritance tax on (unless of course the gov decides to change the rules). So I am not discussing my situation.

I don't see how taking someones money because he died, money he earned and already paid taxes on is in any way just. Be it $10 or $10billion.

You really should. You routinely misunderstand things in a bizarre and mentally disorganized way.

Maybe it's you who is misunderstanding in a bizarre and mentally disorganized way what I am asking/discussing/saying.

I don't read where SueU is having trouble with the point I am putting forth. And I have no trouble understanding his point. We just disagree on the tax.

In one post you agree with taking 100% of accumulated wealth and in another you point out how to get around the taking of some of the money. Pointing that out is me being mentally disorganized?

[Big RR]

Even barring a 100% estate tax, I would think getting rid of the stepped up basis for tax purposes for inheritance transfers should be dropped immediately. There's no good reason for inherited wealth to get a more favorable tax treatment than gifted, or earned, wealth.

Under the current law, if I have a capital asset I will pay income tax on the gain I realize (my selling price minus the price minus the basis (price I paid for it)); the same is true if I give it to you, regardless of whether I pay gift tax or not. However, if you get it as my heir, that basis is stepped up to the value of the stock on the day you receive it, and you could sell it tax free that day (or pay tax on a far lower gain if you sell it in the future).

[oldr_n_wsr]

Oh, and I missed this

The amount you saved, you invested, and which you used to buy a house is much less than the appreciation, which has never been taxed.

We have gone over this point a lot of times.

Interest on saved money (money which was already taxed when I earned it) is taxed every year.
Any investment (again money I invested after earning it and paying the tax when I earned it) is taxed when withdrawn or when it turns a profit (dividends paid etc) depending on the type of investment. Although munibond (I think that's what they are called) are not taxed.
Money made through appreciation of a house is "paper money" while I am alive and until it is sold. Then I pay tax on the profit. Am I supposed to pay taxes on the perceived appreciation every year? If so, will they pay me back when the house depreciates as it has in the past few years?

And wdid we go over this dozens of times? Did I miss that discussion or am I suffering from a senior moment? Point me in the direction so I can refresh my memory.

[oldr_n_wsr]

However, if you get it as my heir, that basis is stepped up to the value of the stock on the day you receive it, and you could sell it tax free that day (or pay tax on a far lower gain if you sell it in the future).

I did not know that. I can agree for inherited assets having to maintain the original basis and my heirs have to pay the same amount of tax on the gains just as I would have had to if I sold them the day before I died.

And I understand your point

The point is to prevent accumulation of dynastic wealth -- transfers of hundreds of millions of dollars -- not a few hundred thousand.

and I don't really disagree with it per se.
But what are we trying to accomplish doing this? Making some rich kid to have to go out and bust his hump working rather than spend his day at the country club?
And what is to be done with the money that is taken? Is it going to go to the poor ghetto kid to put him into the same schools that the rich could might have gone to (who no longer can attend those schools as his parents died and his money was taken)?
I view it as nothing more than a money grab just like red light cameras. They were installed under the banner of "safety" but now that people are aware of them and the revenue stream is going down, they are looking to move them and/or install more.